NEW YORK (CNN/Money) - Helped by the tumble in stocks in June and July, businesses pulled back sharply, canceling orders and slowing production. That means that the fate of the economy once again lies with the consumer.

Indications are that though people are still spending, their pace may be slowing. Thanks in part to generous financing terms, July auto sales rose 8.2 percent from a year earlier, according to Autodata. But retailers' sales reports for July were more sluggish than analysts had expected.

Economists aren't worried about people shutting their wallets just yet. Auto sales are a major driver of consumption, and with all the incentives car companies are offering, sales should stay strong for a while. In addition, low interest rates have provoked a new round of mortgage refinance activity. When householders refinance their mortgages, they lower their monthly payments, giving them more cash to spend.

"The basic story of the consumer is that he's OK in the near term and at risk in the medium term," said Lehman Brothers co-chief economist Ethan Harris.

To begin with, neither auto sales nor refi activity can juice consumer spending indefinitely. The issue is important since consumers fuel about two-thirds of the nation's economy through their purchases of goods and services.

All eyes on the consumer       8/8: Chain store sales mixed 8/8: Mortgage rates hit new lows 8/7: Consumer credit rises 8/1: July auto sales zoom

On the auto front, once most of the people who want and can afford a shiny new car already have one, zero-percent financing ceases to be as meaningful an incentive as it has been. Plus, car companies may be stealing from their own future sales, as well as from other sectors.

On the refinancing front, the incentives may run out, too.The average rate on a 30-year fixed-rate mortgage loan has dipped to 6.31 percent, according to the Freddie Mac -- the lowest since recordkeeping began 32 years ago. That could go lower still if the Federal Reserve cuts short-term rates, but not much.

As the effects of auto incentives and refinancings fade, something else will need to fill in the gap, said Credit Suisse First Boston economist Paddy Jilek. The best way to get people to spend is to increase their confidence in their jobs, and the only way that happens is if companies start hiring, he said.

So far, that's not happened.

Economic commentary from Kathleen Hays

Even though the unemployment rate has been holding steady around 5.9 percent, not many new jobs are being created -- the economy added only 6,000 new jobs in July. If companies don't boost hiring plans over the remainder of the year, Jilek worries that consumer spending could flag like a marathon runner who's hit the wall.

The real worry, however, is that companies don't just refrain from hiring, but start laying people off again. Payrolls shrank by nearly 1.8 million jobs from March 2001 through April 2002 as the economy struggled to emerge from last year's recession.

"What it would take to really undermine consumer spending," said Morgan Stanley chief U.S. economist Richard Berner, "is a job shock."

A sharp rise in unemployment -- to, say, somewhere north of 7 percent -- would leave many American's worried about their jobs, prompting them to spend less.

For the people who lost their jobs, of course, it would be even worse. About 14 percent of household income currently goes to paying off debt, according to the Fed -- near the high of the past 20 years. Debt payments and no job are a lousy combination. Even more people would be forced into bankruptcy.

A big chunk (nearly half) of those debt payments go for mortgage payments. If unemployment spikes and the real estate sector suffers, that would hurt spending even more.

Even as the economy hit the rocks, housing prices have soared -- the average price for a new house was $221,000 in June, according to the Census Bureau, up from $198,000 two years ago. Seeing home prices rise has been a balm for many investors who have seen their stock portfolios decimated. If housing prices start falling too, they'll really start to worry. And if the real value of their home is less than what it was assessed at when they took out a fat mortgage, they'll really start to feel strapped.

So is there any good news to report? Sort of. Berner thinks the only way to get the job shock would be for there to be a real shock to the economy -- for example, if lending markets seized up, making credit scarce for businesses and consumers. But it would take something severe, he added, because companies already cut back so sharply last year. In other words, falls don't hurt as bad when you're close to the floor.

But at the same time, he thinks the economy's recent downdraft makes it more vulnerable to shock. An accident probably won't happen, but the consequences if it did happen would be severe. That will be something the Fed will need to think about when it meets next Tuesday.